The United States and Japan will step up their defence cooperation to deal with the threat from nuclear-armed North Korea as tensions in East Asia remain high, officials from the two allies said on Thursday.

East West Link costs taxpayers $1 billion

The Victorian government will only be able to recoup a fraction of the $1.1 billion it spent to dump the East West Link toll project.

A report by acting Auditor-General Peter Frost, released on Wednesday, was deeply critical of the state Labor and Liberal governments' handling of the costly project.

Dr Frost wrote that although the properties acquired by the former government as part of the project could be resold for about $320 million, Victoria will ultimately be slapped with a $1.1 billion bill for the cancellation.

Before he was elected premier last year, Daniel Andrews vowed not to build the road and promised Victorians would not pay "one cent" in compensation for dumping the project.

The report found the Andrews government also failed to properly investigate whether the project was worth keeping, something Treasurer Tim Pallas denies.

Labor sought independent verification on the business case for the project first, he said.

"We believed the process was satisfactory and was appropriate in the context of the overall deal," Mr Pallas told reporters on Wednesday.

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Dr Frost was also scathing of key decisions made during project planning, development and procurement phases that he said were driven by an overriding sense of urgency to sign the contract before the November 2014 state election.

Signing the contract while knowing there was significant uncertainty about the state of critical planning approvals was imprudent and exposed the state to greater cost and risk, he said.

Mr Pallas said the former Napthine government had been aware of Labor's pledge to rip up the East West Link contract, yet continued with its plans just before the election.

"A mandate is what we sought, that was what we received and that was what we acted under. And we made it very clear that this project would not proceed," the treasurer said.

Opposition spokesman and former state treasurer Michael O'Brien said the road badly needed by Victorians was wasted by the Andrews government.

"This is a very important project and it will be built," he said on Wednesday.

Mr O'Brien said that unlike Labor, the coalition accepted the report's recommendations.

However, when asked if he agreed with the criticisms of his former government, Mr O'Brien said he did not accept Liberals did anything wrong.